Elon Musk Fear of Jail if Kamala Harris Defeats Trump: "If He Loses, I’m F—ed!"

[deejah]

i missed microsoft and google

heck if i am going to miss out on facebook if it goes public

bear in mind i have very good luck with most things including money

EXCEPT investing in markets etc

with that in mind DONT buy facebook if I DO

i just dont think i can keep my hands off of the next big thing while i am still alive and willing to play the market at least a little bit

mid 2009 when the markets were affordable, i finally did so much due diligence

(completely lost everything in the 2001 bust)

when silver was trading around 15

opened up two brokerage accounts and just got so confused by everything i read i gave up

i also missed the 3 times in the past 20 years oil was a bargain

so dont listen to me about markets or trading

i haven't checked in a while

but the only other real bargain i saw was natural gas this past year

at some point that play is going make people a fortune

i do watch the dollar oil silver gold and euro daily like a hawk, just for the fun of it

man did silver and euro do a dive!!!!!!

dollar up to the baht, strong!!!!

anyway this is an interesting if not fairy book article about the valuation of facebook at 50 billion bucks

anyone else ready to gamble on it?

Another Brick in the Wall:

Facebook IPO: Fool's Gold or Value Play?

Ed Pawelec

News of Goldman Sachs' investment in Facebook has been all over the news, so I thought I would play with the numbers a little to see if an impending IPO would end up being a scam or a value when the company does go public.

The exact financials are vague at best at this point, and can only be guessed at by reports in the financial press, but we can have some fun with this anyway.

The value of the company according a variety of reports is in the $50 billion range, which some have said is ridiculous. In fact, The Wall Street Journal quoted one former Goldman partner who was offered a piece of the action as saying, "Google's trading at 7 times sales. I'm not going to buy Facebook at 25 to 50 times." Interesting.

The valuation is based on the portion of the company to be purchased in a joint investment by Goldman Sachs ($450 million) and Digital Sky ($50 million) for $500 million. However, Goldman is also reported to have been putting together an additional $1.5 billion through a Partner Private Opportunity Fund, so how they come up with $50 billion is a little unclear. Nevertheless, I'll go with the $50 billion number.

Now, Mark Zuckerberg (Facebook's founder and CEO) is trying not to go public, which requires these investments to be bundled into Special Purpose Vehicles (SPV) so as not to go a foul of the SEC's 500 investor rule. Essentially, this requires any company that has 500 or more shareholders and $10 million in assets to file their financials with the SEC, thus making it public information. This rule is rumored to have been the motivation for Google to go public in 2004. If you have to report publicly anyway, why not do an IPO?

According to the rule, a company that exceeds that threshold must begin reporting within 120 days of the close of the fiscal year in which it reaches 500 shareholders. Since the current offering from Goldman, which could put Facebook over the 500 shareholder mark, is occurring in 2011, and Facebook's fiscal year ends on December 31, the expectation is for an IPO no later than April of 2012.

This might be avoided if the SEC accepts Goldman's SPV as a single investor. The SPV is, in its simplest terms, a group of investors clumped together as a single entity, which then invests in Facebook and is counted as only one investor. We will see how that works out.

Enough with the background, let's jump into the numbers.

Who says a dollar isn't worth what it used to be?

For 2009, Facebook is said to have earned $200 million on revenues of $777 million -- a tidy 25% margin. For the first 9 months of 2010, reports are that the company is up $355 million on revenues of $1.2 billion -- an even better 29.5% margin. For all of 2010, estimates are for $500 million in earnings, which would suggest revenues of $1.6 billion.

Based on a $50 billion estimated market capitalization, that puts a PE ratio of 100 on Facebook. Seems a little rich by most standards. That being said, stocks frequently trade based on how fast they can grow their earnings and, assuming we can take the $500 million expected for 2010 at face value, Facebook grew earnings at 150% year over year. Maybe 100 times isn't too ridiculous if you make the assumption that they can maintain that growth rate.

Internet World Stats numbers Facebook subscribers at 517 million plus (as of Aug 30, 2010) compared to recent estimates of 600 million. I have to admit, either number is impressive. But, if you think about it: $500 million net income divided by 600 million subscribers means that each subscriber is worth $.83 to Mark Zuckerberg and his investors -- just under a buck per year.

Zillions of man hours wasted on Facebook each year so some 26 year old nerd from Harvard can make $.83 on each user.

Think about that.

Critical Mass

But you have to give the guy credit for finding 600 million people he could squeeze $.83 out of.

Hold on a minute! How many people are on the planet?

Well, recent estimates are in the neighborhood of 6.8 billion. By 2020 there will be about 7.7 billion people, and most of these would need to be worth at least $.83 for Facebook to be fairly valued at $50 billion today. But you can't have Facebook without the internet, and not everybody in the world is wired ... at least not yet.

Unsurprisingly, the growth in the number of internet users has dropped considerably over the years ...

sorry thai visa would not allow image

With the number of users doubling every year during the heyday in the late 1990's, things had to cool down. Over the last five years, growth has steadied to a strong 13-15% annual rate. Again, according to World Internet Stats, nearly 2 billion people have internet access. Almost 29% of the world is wired for the web and 26% of them use Facebook, each worth $.83.

Now if internet access continues to grow at a 13% rate for the foreseeable future, sometime during 2021 every person on earth will be connected to the web. Yes, you will be able to check your Facebook page from anyplace in sub Saharan Africa, as long as there are people, by 2021 ... maybe not.

Since Facebook is just about 7 years old, its growth rate has been exponential. For argument's sake, however, let's just say that it can grow subscribers at a 25% annual rate. By early 2023, everyone on earth, who has already had the internet for two years, will now be available for friending on Facebook.

While this is clearly something to look forward to, stay with me -- I do have a point.

In this outlandish scenario, with the world population valued at $.83 a head, and if Facebook kicks all of its earnings back to shareholders, it becomes a perpetuity. This means that the present value of the company can be determined simply by choosing a discount rate. Since we are talking about just over 10 years, the approximate 3.4% rate on the ten year note is as good as any. And the calculation goes:

(World Population in 2023 * $.83) / 3.4% =

(7,900,000,000 *.83) / .034 = $192.85 Billion

Before you deem this exercise silly, think about a more feasible scenario:

If, by 2023, half the world is wired and half of them use Facebook, using this same crude calculation the numbers come to $48 billion, which happens to be darn close to the $50 billion number being bandied about these days.

The point here is that Facebook is a unique company in that it actually has the potential to reach the entirety of the internet capable world and therefore, to its detriment, it does have a maximum value that can be calculated. I realize that the company could increase its per subscriber value and that the discount rate is somewhat arbitrary, but I found it interesting how doing some back of the cocktail napkin math came so close to the value ascribed by the pundits and analysts.

In any event, at least now you have some idea what it would take to make this company worth $50 billion today.

[deejah]

there is a good thread on this topic (not this thread) in the tech forum

and a good link to an article

why i wouldn't buy face book

my reason now:

FACBOOK SUX

[ExpatJ]

As myspace.com shows, facebook could quite easily (probably) fall in popularity in the next few years to be replaced by the next new and exciting social networking website. FB in my opinion has become way to over complicated and intrusive and is trying to be all things to all people and i think will people tire of that e.g. FB will be ok at doing many things, but not excellent in doing them so people will shift over to other more specialized sites...

News corp. bought myspace for 500 million a few years ago amongst much hype- now they would be lucky to get 50 (and they have just fired most of the myspace staff too- google it).

[deejah]

someone rumored to me that the cia owned a chunk of FB

the user interface is not so easy/friendly

but i have to tell you

i am spending more and more time on the darn thing

and it is reportedly the most visited/used site

i can totally see the appeal for now

one

you can start a blog and you know at least someone is going to read it

(your friends will read your wall)

two

its a voyeurs paradise!

and i am not even a voyeur or a nosy buddy

but i find myself perusing

three

you can delete whatever you want

i would sure like to know who is visiting my profile or reading my wall, though, it feels kind of naked, perhaps that's the web for ya

how did facebook become more popular than myspace?

i guess that movie explains it

being in the right place at the right time

is that all?

there has been a pretty good doc on bloom burg about FB

perhaps we will tire of FB

Edited January 18, 2011 by deejah

[brahmburgers]

one hyphenated word explains why Facebook is wildly overvalued: ad-block

Facebook gets most of its revenue, other than fat loans, from advertisers. However, most web users have ad-blockers, which are almost as common an accessory as anti-virus programs. If an increasing # of Facebook users don't see ads, then the ads decrease in value. In awhile, advertisers (incl. MSFT, which is a big advertiser there) will begin to realize Facebook members aren't seeing their ads. Advertisers are business people, so you can expect they're behind the 8 ball in the realization dept.

$50 billion is ridiculous valuation. If I was a shareholder in Facebook, I'd cash out sooner than you can say 'bogus valuation.'

Here's a link that tells why Facebook is grossly overvalued, and they don't even mention the 'ad-block' factor.